After recession, lessons of pain and resilience

My first glimpse came as a teenager, when my dad insisted I tag along as he stalked machinery auctions. It was the early 1980s. Jobs were evaporating by the millions as factories closed by the thousands in what became known as the Rust Belt.

Although his borrowing cost was 20 percent a year, my father was suddenly able to buy high-tech machinery for less than its value, by the pound, as scrap iron.

For his small, contract-machining business, the recession’s new arithmetic was relentless: To win work, he had to deeply undercut the internal costs of companies with years of practice making their components, by somehow acquiring technology and expertise more quickly and cheaply than both his customers and competitors.

My dad’s company survived and eventually thrived. So did the competing one my brother and I started in 1988, along with the digital media company I co-founded a decade later.

As a capitalist and business journalist in the 21st century, I’ve had a front-row seat to uncounted stories of boom and bust, adaptation and rebirth. My problem is that I tend to learn the hard way.

For example, I sold my half of my first company so I could consume bourbon and other drugs full time. After a few years in self-imposed hell, I woke up — I haven’t had a drink, wrecked a car or been to jail in nearly 16 years.

But I won’t soon forget what it’s like to tumble from wealthy to homeless, and claw back to the middle class. And I learned that few crises, professional or personal, are navigated successfully without plenty of help.

In business, I have been extraordinarily lucky. Our precision-machining company rode the wave of falling interest rates and booming consumption that defined the Reagan recovery. Our digital media company had a sterling business plan, but my ability to raise money had more to do with timing. It was the height of the late-1990s tech-stock boom, an era when investors threw cash at companies that lacked revenue and used sock puppets to explain their products.

As a journalist, my work has swayed with the various pendulum swings of the economy. My job was to dispassionately explain the political-regulatory debacle of California’s power crisis, the giddy free-for-all of its housing boom, and the grinding despair of its aftermath. It was hard to sit on my hands.

Through four recessions, I have come to loathe the term “creative destruction.” Clearly, survivors can emerge stronger. But it’s dangerous to be lulled by the happy ending, for tears await those who forget the Darwinian brutality of the business cycle.

This decade’s Great Recession is no different. Last week, I talked to a bank president who reported that, compared to five years ago, small-business owners applying for loans are displaying dramatic improvement in cash management, financial reporting and operations.

Have owners gotten better, or did the sloppy ones all go broke? Our impressed banker is certainly seeing both outcomes.